Nissan and Daimler to Build Engines in Tennessee

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Daimler and the Renault-Nissan Alliance in April 2010 arranged an equity exchange that gives the Alliance a 3.1% stake in Daimler and Daimler a combined 3.1% interest in Renault and Nissan.

Nissan and Daimler will produce Mercedes-Benz 4-cylinder gasoline engines together at Nissan’s powertrain assembly plant in Decherd, Tenn. Production will begin in 2014, with an installed capacity eventually reaching 250,000 units per year. The Decherd facility will make engines for upcoming Mercedes-Benz and Infiniti models.

The Tennessee plant will supply engines for the revised Mercedes-Benz C-Class, to be built at Daimler’s plant in Tuscaloosa, Alabama. Four-cylinder engines – once unheard of in luxury cars – are increasingly being used to meet new fuel economy standards.

For years Mercedes-Benz sold gas guzzlers in the U.S., paying millions in fines – passed on to customers – for its flouting of CAFE regulations. Much higher fines under the latest CAFE standards, as well as growing pro-environmental customers and standards makes this a risky strategy going forward.

Mercedes-Benz USA (MBUSA) sold  264,460 vehicles in 2011 – the highest annual volume on record with a 17.5% increase over the 225,007 vehicles sold during the same period in 2010. This made Mercedes the best selling luxury brand in the U.S. Far smaller Infiniti –  sales of 98,461 in 2011 were down 4.8% compared to 103,411 units sold during 2010 –  plans to offer a new vehicle based on the Mercedes compact-car architecture starting in 2014.

Nissan began powertrain assembly in Decherd in 1997. Nissan now manufactures 4-, 6- and 8-cylinder engines for U.S.-assembled Nissan and Infiniti vehicles. The 1.2 million square-foot plant also has  crankshaft forging and cylinder block casting operations. In 2011, Decherd produced more than 580,000 engines.

“Localized capacity reduces exposure to foreign exchange rates while rapidly enabling a good business development in North America – a win-win for the Alliance and Daimler,” said Renault-Nissan CEO Carlos Ghosn, who after missing the fuel efficient Toyota hybrid innovation has made a $4.6 million shareholder bet on electric vehicles.

Daimler and the Renault-Nissan Alliance started collaboration in April 2010 with an equity exchange that gives the Renault-Nissan Alliance a 3.1% stake in Daimler and Daimler a combined 3.1% interest in Renault and Nissan.

The collaboration began with three projects:

  • One  Smart and Twingo architecture will launch  in the first quarter of 2014. Two-seater Smart vehicles will be produced at Daimler’s plant in Hambach, France, and four-seat Smart and Renault production will be at Renault’s plant in Novo Mesto, Slovenia.
  • There is also an all-new entry-level city van project for Mercedes-Benz which will begin in late 2012, with production at Renault’s plant in Maubeuge, France.
  • The Alliance is now supplying Daimler with compact three-cylinder gasoline engines to be used in Smart and Twingo vehicles and four-cylinder diesel engines to be used in the jointly developed light commercial vehicle and in Mercedes-Benz’s next generation  of compact cars. Daimler will supply Nissan and Infiniti with four- and six-cylinder gasoline and diesel engines as well as with automatic transmissions.

Daimler will also provide batteries from its production facility in Kamenz, Germany, and Renault-Nissan will provide electric motors for the use in electric vehicles – Smart and Twingo ZE with an expected 2014 rollout.

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